A business receives cash from a customer who previously bought goods on credit. Which entry is correct?
Correct answer: D. Debit cash and credit accounts receivable
- A. Debit cash and credit sales
- B. Debit accounts receivable and credit cash
- C. Debit sales and credit cash
- D. Debit cash and credit accounts receivable
Explanation
Cash is an asset that increases, so it is debited. The customer's receivable decreases, so the receivable account is credited; no new sale is recorded.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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